The rise of the angel investor

04 May 2015 / TV3 News

The NZ Venture Investment Fund has announced that angel networks and funds invested $55.9 million into young New Zealand companies in 2014.

What is an angel investor? It is typically someone who is wealthy and who provides money to a business start-up, usually in exchange for an ownership stake in the business.

The NZ Venture Investment Fund has announced that angel networks and funds invested $55.9 million into young New Zealand companies in 2014. That's a record amount, with over half going into software investment.

Investment Fund chief executive Franceska Banga said this is the first time the Young Company Finance Index has recorded consecutive $50 million-plus investment years. $53.1m was invested in 2013.

"When the index first measured angel group investment activity in 2006, just over $20m was being invested annually. The sector, if current growth trends continue, is likely to treble in size within a decade," she said.

"The driver of this over the past few years has been the rise and rise of investment in software companies with $26.2m last year and $27.9m in 2013 - around a half of the annual investment.

"Historically, software companies have attracted about a third of the annual angel group investment.

"This is likely due to the demonstrator effect of companies such as Xero, Orion Health and Jade, along with global trends towards all things digital. Alongside the fact that New Zealanders have a good track record in this sector, the pathways for the creation of valuable enterprises is now more straightforward than in the past."

The report found that 2014 saw a higher level of 'new' investment compared with 'follow-on' investment - $21.3m of new investment in 2014 compared with 2013's $10.3m.

The report measures angel group investment activity, but it does not capture "considerable" private investment which occurs outside the formal networks.

NZ Angel Association chair Marcel van den Assum said "We estimate the number of angel investors involved in networks has grown from around 370 to 730 in the past two years. Having more investors contributing to deals is also good for the sector in that it allows individual angels to spread their capital across wider portfolios."